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Tech giant Avaya: from Chapter 11 to a new chapter

Avaya president and CEO Jim Chirico on how the company overcame a turbulent year, and is using the opportunity to propel itself in a new direction

By Bernd Debusmann Jr

Sat 21 Oct 2017 12:25 AM

For most companies and their CEOs, filing for Chapter 11 bankruptcy would be considered nothing less than disaster: the possible death knell for a company. But for Jim Chirico, the new CEO of American tech giant Avaya, it’s a bend in the road on the path to new opportunities and a transformed company.

After serving as chief operating officer and global sales leader, Chirico took the helm of Avaya on October 1 at a vital moment in the company’s history, nearly ten months after it filed for Chapter 11 bankruptcy. At the time, it was described as part of a transition from a hardware company focused on call centre infrastructure and private branch exchanges, to a software and services company that is focused on the Cloud and other, newer technologies.

The bankruptcy filing, Chirico recalls, was designed to cut Avaya’s debt and interest expenses and transform the company’s decades old capital structure, and reduce a debt load of $6.3bn. “Chapter 11 helped us with our debt. We were well over-leveraged from when we went private almost ten years ago,” he says, adding that “It didn’t have anything to do with the solvency of our company, but was more around helping us rebalance our debt structure.”

Upsides to the downside

According to Chirico, the Chapter 11 process was not without its benefits. “On the challenging side of the equation, obviously when you go through Chapter 11 some of your customers get a bit nervous about the risk and longevity of the company.”

On the plus side, he says that his teams have done an “excellent job overcoming that fear,” while the experience has also “really showed how loyal our customers have been to Avaya.”

Chirico helped optimised Avaya’s global business processes and has led the company’s effort for Chapter 11 emergence

Over the last ten months of Avaya’s Chapter 11 ordeal, he notes, the company has not lost any customers, and performance has exceeded the targets outlined in an April business plan filed in accordance with the exit process from Chapter 11.

“I really want to thank our partners for that. They’ve stuck with us. Frankly, they’ve been an extension of the Avaya workforce, and it’s actually been a great relationship with the partner base over the last nine to ten months.”

“It’s also been rewarding... When you’re going through Chapter 11, your customers like regular updates on where you are in the process,” he adds. “It’s actually enabled us to get closer with them because of the ongoing communications we’ve had with them.”

If everything goes according to plan, Avaya plans to exit from Chapter 11 at a November 15 bankruptcy court confirmation hearing.

“There’s still a few things that we need to do, in fairness, to make sure that we do exit [from Chapter 11] as a result of that,” Chirico says. “But we’re making tremendous progress…we will be very comfortable.”

Chirico hopes that Avaya becomes a publicly traded company in early December. “We will be doing a debt to equity exchange,” Chirico notes. “We’re looking now whether we do NASDAQ or the New York Stock Exchange. There’s great interest from both, so we’ll be making that decision in the weeks to come. But Avaya’s ready to excel.”

Perhaps more importantly, Chirico says, the company’s exit from Chapter 11 will see it cut its debt requirements by more than half – or approximately $3bn – which will also allow the company to add an additional $300m in funds.

“We will use that cash to do greater investments within our R&D. Secondly, we will add more to our sales organisation. We’ll invest more within emerging technologies like AI (Artificial intelligence) and blockchain, and we will be able to do more in services, as well as taking a look at potential opportunities for mergers and acquisitions.”

This new balance sheet which allows the company to move away from significant quarterly interest payments and focus on new technologies, Chirico says, has left him and the rest of Avaya’s employees “very excited” about the future.

New tech on display

At GITEX Technology Week in Dubai earlier this month, Avaya showcased some of the technologies and solutions that Chirico says will continue to propel the company forward, both in terms of the contact centre technology for which the company is perhaps best known, and of the emerging technologies that Chirico says the company will be investing more heavily on as it emerges from Chapter 11.

Dubai’s Roads and Transport Authority (RTA) is among Avaya’s big-name clients in the region

Among the solutions unveiled by Avaya were a video chat and call service that will allow people with disabilities to initiate video calls with sign-language-fluent agents of Dubai’s Roads and Transport Authority (RTA), as well as see pre-recorded sign language messages answering some of RTA’s most common queries. Such contact centre technology, Chirico says, is “core to the success of the company.”

“It enables our key customers to drive productivity and bring new solutions into their workforce. This means they can optimise and grow by scaling these efficiencies within their business,” he says, adding that new technology allows contact centre interaction with customers to occur “much more seamlessly” through multichannel capabilities. “Your call is routed to an agent that understands you. The call is then provided with a level of analytics to that contact centre agent so they can quickly resolve any issues you may have. It’s really driving productivity and cost savings for our customer base.”

Avaya’s GITEX announcements also provide a window into the sorts of emerging technologies that Chirico says Avaya have identified as “tremendous” opportunities that enable the company to provide solutions to the needs of the public safety, security or healthcare sectors in the age of the Internet of Things (IoT).

As an example, Chirico points to the video solutions that Avaya is now providing to Dubai’s General Directorate of Civil Defence. It allows drones responding to fire or traffic incidents to provide live video feeds to headquarters and share information with other mobile devices, which Chirico says enables them to “handle emergency calls at the right time and in the right place where needed.”

The project follows a 2016 agreement under which Dubai Civil Defence became the first global customer for the Avaya Equinox unified communications platform.

According to Chirico, such technologies are just the tip of the iceberg of what Avaya will be revealing in the future. “We not only have an AI application, but we’re also introducing blockchain. It brings tremendous value to the marketplace, and we are going to compete significantly within the market in both of those new emerging technologies,” he says of the ambitious plans.

New beginnings

Avaya’s challenging year, and the technological transformation that has taken place concurrently, have required several internal changes to adjust to new realities. The change, Chirico says, began several years ago as the company began to see itself in a different light.

Avaya is leveraging on the strength of its software and IT services

“The company has been changing for the last three to four years, and that transformation is about moving away from your traditional hardware PBX (private branch exchange),” he recalls.

“Lots of our competitors still think we’re a PBX company. We are not – 85 percent of our revenues come from software and services. AI, blockchain, emerging technologies, the Internet of Things, actually fuel growth, whether it’s in software or from a services perspective.”

Chirico confidently brushes aside any question about whether Avaya’s workforce is up to the task of keeping pace with technology, saying that the company has gone to considerable lengths to inject “more relevant skills” as part of the transformation. “We understand what the customer wants. And this will be supported by a cultural change within the company, that’s really based around driving execution.”

Moving forward, Chirico says Avaya plans to simplify structures within the company, implement more accountability measures, and align the various teams within the organisation. Most importantly, however, he says Avaya plans to fully utilise the talents of its employees. “Our employees will drive innovation within the company. They’re empowered to bring the solutions forward,” he says confidently.

“Headquarters will be there to offer support when needed, and it’s a complete mind shift [compared to] the operating model we had previously. We’re a culture and a company that’s really focussed on winning... now that we’re freed of that burden [of debt payments and Chapter 11] we’re going to go more and more on the offense.”